Government announces new measures to tackle unemployment

In January 2010, the Portuguese government announced a new economic package to tackle unemployment, which will cost the state €490 million, €90 million less than the previous package. The overall objectives of the Employment Initiative 2010 are to maintain jobs, encourage young people into the labour market, create employment and combat unemployment. The Minister of Labour and Social Solidarity estimates that the measures will affect about 760,000 people.

Government anti-crisis packages

In 2009, about 200,000 persons were included in government measures to support the maintenance of employment, the value of which amounted to more than €57 million. Furthermore, around 200,000 people were involved in active employment measures to encourage integration into the labour market; 100,000 of these individuals availed of the exceptional measures included in the Investment and Employment Initiative 2009 (Iniciativa Investimento e Emprego 2009), while the remainder accessed already existing measures. Overall, the state spent around €300 million in combating the effects of the global economic crisis, €100 million of which aimed to support young people’s integration into the labour market, targeting around 40,000 young persons. Nevertheless, the government did not fully reach the goals set in the anti-crisis package, which entailed a total investment of €580 million, having implemented 70% of the envisaged plan.

On 14 January 2010, the government announced a new package for combating unemployment which will cost the state around €490 million, €90 million less than the previous anti-crisis initiative. The latest package, Employment Initiative 2010 (Iniciativa para o Emprego 2010), comprises 17 measures, and was presented by the Minister of Labour and Social Solidarity, Maria-Helena André, after the Council of Ministers meeting. In total, according to Minister André, the initiative should reach about 760,000 people. The overall objective of the employment initiative is to maintain jobs, encourage the inclusion of young people in the labour market, create employment and combat unemployment.

Maintaining jobs

With regard to the maintenance of employment, the government package includes the following initiatives:

• maintaining for 2010 the three percentage point reduction in social security contributions payable by micro and small business employers in relation to workers older than 45 years;

• reducing by one percentage point during 2010 the social security contributions paid by employers for workers with mandatory minimum wages in 2009 and for workers with monthly wages of up to €475 resulting from collective bargaining, whose wage increase in 2010 will be at least €25 a month;

• renewing the qualification-employment programme for the automotive industry in 2010 and expanding it to sectors of activity with the greatest exposure to the economic crisis and seasonality – such as textiles and clothing, tourism, furniture manufacturing, and wholesale and retail trade. This will apply in situations of reduced activity of the companies and intermittent employment contracts, in order to promote the qualification of workers.

Integrating young people into labour market

In relation to encouraging young people into the labour market, the Employment Initiative 2010 provides for the following measures:

• promoting the use of open-ended employment contracts for hiring people aged under 35 years who are seeking their first job or who are unemployed and registered in the employment centres for more than six months. This will be done by providing direct support of €2,500 as a one-off payment and exempting the employers from payment of the associated social security contributions for 24 months. Alternatively, the employers may forego the one-off payment and be exempt from the social security payments for 36 months;

• fostering implementation of the INOV programme, including training programmes for young persons with a university degree in specific fields such as sociocultural mediation, the environment, civil protection and renewable energies;

• creating a professional internship programme for young people who attend professional and technological courses or who have a secondary school education or equivalent qualification level;

• setting up a programme to support the recruitment of young people who have already completed an internship programme, particularly in technological areas, and encouraging contacts between schools and employers;

• offering re-qualification opportunities for 5,000 young persons with a university degree in sectors of low employability to facilitate their adequate integration into the labour market.

Creating employment and combating unemployment

In terms of creating employment and combating unemployment, direct state support is granted to companies in the form of a one-off payment of €2,500 combined with a 24-month exemption from payment of the relevant social security contributions, or employers may choose a 36-month exemption from payment of social security contributions, as outlined above. This state aid applies in respect of:

• encouraging the use of open-ended employment contracts when hiring unemployed people enrolled in the employment centres for more than six months;

• concluding open-ended contracts for hiring unemployed people aged 40 years or above who are enrolled in employment centres for more than nine months. In addition, support will also apply to short-term employment contracts with unemployed persons, through a reduction of 50% of the employer’s social security contributions during the first year of the contract and a reduction of 65% in the following years;

• integrating an internship programme for unemployed people aged more than 35 years who do not receive unemployment benefits, and who have completed basic or secondary education through the New Opportunities programme (Novas Oportunidades) or who have obtained a university degree. In this case, the government package aims to provide support to institutions or companies that promote the internship, amounting to 75% of the payment due to the enrolled candidates in the case of a non-profit entity, or 60% of the payment in the case of a for-profit entity.

Furthermore, in this area, the Employment Initiative 2010 envisages:

• extending payment of the initial unemployment social allowance and unemployment benefit for an additional period of six months when those benefits expire during 2010 (PT0906029I);

• extending until 31 December 2010 applications for access to extraordinary credit intended to finance 50% of the monthly mortgage payment for people who have been unemployed for at least three months;

• introducing the necessary modifications to the integrated system of managing training provision (sistema integrado de gestão da oferta formativa, SIGO), with the aim of promoting a more effective identification of trainees who are unemployed in order to encourage their inclusion in active employment measures;

• increasing up to 50,000 the number of persons to be covered by employment-inclusion contracts (contratos de emprego-inserção), which are intended for subsidised unemployed people who are engaged in occupational programmes, and increasing up to 12,000 the number of people covered by the employment-inclusion contracts + (contratos de emprego-inserção +). The latter are intended for unemployed beneficiaries of social inclusion income (rendimento social de inserção) who are engaged in activities considered socially useful;

• strengthening a specific credit line, with the aim of encouraging unemployed people to create their own companies.

Commentary

According to the Statistical Office of the European Communities, Eurostat, the unemployment rate in Portugal in December 2009 was 10.4%. This represents an increase of 2.3 percentage points compared with the previous year. In the case of youth unemployment, the rate amounted to 18.5% in December 2009. The government measures aim to address a situation of rising unemployment, by fostering recruitment or maintenance of jobs, either by promoting vocational training and/or paid internships or by engaging people in occupational programmes. With the exception of extending payment of the initial unemployment social allowance and unemployment benefit for an additional period of six months, and the access to extraordinary credit intended to finance 50% of the monthly mortgage payment for unemployed persons, the envisaged measures consist of direct or indirect support to companies.

All of the costs of the measures designed to help companies are mostly the responsibility of the state and are provided by the state budget; however, many are promoted at the expense of the social security system, creating additional pressure on this system. The support for recruitment on the basis of open-ended employment contracts aims to overcome the high level of precarious employment in Portugal, but it is doubtful whether in a time of economic crisis companies are willing to commit themselves enough to make it a successful measure.

In the latest initiative – unlike the 2009 anti-crisis package – the government introduces measures to support the creation of temporary jobs, for instance for unemployed people aged over 40 years, the age group which is more likely to be in a situation of long-term unemployment. Among the measures for maintaining employment are those which resulted from the commitment between the government and the employers to raise the statutory minimum wage, including a reduction of the single social tax (taxa social única) on the minimum wage by one percentage point, the equivalent of €4.75 per worker (PT0912029I).

Maria da Paz Campos Lima, Dinâmia